Trillion Energy International Inc. is pleased to announce the results of its December 31, 2020 year end reserve report (the “Reserve Report”) prepared by GLJ Consultants (“GLJ”), an independent third-party consulting firm, as well as management’s discussion of same.
In completing the Reserve Report (1) (2), GLJ assessed the oil reserves on the Cendere oil field as well as four developed, unproduced gas pools on the SASB gas fields, Black Sea. The Reserve Report does not include any assessment of risked development prospects contiguous to the reserves. 10 of 23 prospects on the SASB gas fields were previously assessed by GLJ in its report released June 30, 2020 (the “Prospects Report” (1) (2)).
1) Summary of GLJ’s assessments of the SASB Gas fields in the Reserve Report and Prospects Report
The combined net present value of EBITA/cashflows, discounted at 10% (NPV10%) 2P Reserves plus medium estimates contained in the Prospects Report is USD $139.8 Million; for 3P Reserves plus high estimates the total is US $243.3 Million (see: Table below), all exclusive of values for the 13 unassessed prospects on the SASB field, which assessment is pending seismic reprocessing.
2) Management discussion of GLJ’s assessments for SASB
a) Discussion and adjustments for recovery factors and chance of commerciality
The Company believes GLJ’s gas recovery factor (RF) used of 60% to 70% for the discovered non-producing pools and 56% RF for the development prospects is too conservative, as historically, recovery factors realized to date have been closer to 80% of the original gas in place. In addition, GLJ deducted a 10% chance of commerciality factor. Management believes an 80% RF is most probable and assuming the development proceeds, the 10% penalty is irrelevant. Considering these adjustments, management estimates the combined NPV10%(1) (2) for 2P reserves plus medium estimates for prospective resources assessed by GLJ is $US 207 million and for 3P plus high estimates is $US 359.7 million.
b) SASB reserves plus unrisked prospects
The combined NPV10(1) (2) in the Reserve Report for the SASB reserves plus GLJ’s unrisked prospects as contained in the Prospective Report is NPV10 for 2P plus medium estimates is US $445.5 Million and for 3P + High estimates is US $820.5 Million.
It is management’s intention to fully realize the potential of SASB by producing the above gas reserves and resources, in a timeline which management anticipates will be announced within 30 days.
3) Further assessments to identify potential reserves and prospects to occur during 2021 on SASB
The Company intends to assess the 13 unassessed gas prospects during the initial redevelopment of SASB, which will add additional gas reserves and resources. These 13 unassessed gas prospects are comprised of stratigraphic channels, thin bed gas layers in the existing fields. Trillion has exceptionally good quality 3D seismic over the existing production license and plans to reprocess the seismic with more modern methods and remap the block, will is expected to take 6 months. This new seismic work will de-risk the known exploration prospects and bring them to being drill ready. The new seismic work and mapping will also allow the initial investigation of stratigraphically deeper gas potential.
4) Cendere Reserves
GLJ assessed the Company’s’ interest in the Cendere oil field as P2 reserves(1) of 303 Mbbls and P3 reserves of 370 Mbbl, all having a NPV10(2) for P2 reserves of US$3.9 million and P3 of US$4.9 million.
The Reserves Report and Prospects Report have been prepared in accordance with resource definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation (COGE) Handbook. The resources definitions used in preparing this report are those contained in the COGE Handbook and the Canadian Securities Administrators National Instrument 51-101 (NI 51-101).
(*NPV 10 Valuation is the discounted value of the reserves after all capital development, operating, costs, and royalties before taxes, discounted to present day dollars)
Prospective resources have both an associated chance of discovery and a chance of development to derive a final chance of commerciality. GLJ has assigned a 90% chance of development for all six prospects and a chance of discovery ranging from 50% to 90% resulting in a range of chance of commerciality from 45% to 81%.